Will the Budget do anything for house buyers?

I wonder will the government do something to help first time buyers?
Joan Burton said it was a priority...

Young home-buyers a priority, Burton pledges

But later seemed to play it down.

Joan Burton plays down value of first-time buyer grants

I don't think that young home-buyers should be a priority.

The priority should be to build more houses and it doesn't matter if they are bought by first-time buyers, second time buyers or investors. We need to increase the supply of houses.

The government should not interfere, or more correctly, should reduce its interference, by cutting the government's inputs into the cost of building houses.

Brendan

They could bring back the first time buyer's grant, it gave a much needed boost to young first time home buyers in the past. Many of us oldies remember buying the furniture and doing the painting and decorating etc with the proceeds. Shame really when they did away with it. It was money spend in the local economy and I feel it also acted as a sort of incentive for young people to purchase or built their own home in those days.

I think we need to increase the supply of houses, but also somehow bias the sales towards PPRs rather than investors.
I believe that a policy favouring PPRs in the long run has the capacity to reduce the state's burden in terms of housing supports and produce a more stable housing market and society.
I am thinking here of the people who want to own their own home, and are paying out significant rents every month but are stuck in a cycle of high rent - can't save for a deposit. In 20-30 years time, it will be better if they own their own home outright and are not hitting retirement age \ redundancies in a situation where they are still looking for rent money every month and then end up dependent on state supports.

I would rather see this done via tax credits \ mortgage interest relief or similar schemes etc than straight out grants. But I don't see how they can break the cycle so that the people above can be in a position to save anything for a deposit. It might be time for rent-to-own social housing schemes in these rumoured new NAMA developments as a way around the deposit trap and without fuelling a property price jump. Just throwing that idea out there... feel free to critique...

Brendan Burgess said:

I wonder will the government do something to help first time buyers?

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I really hope the Government resists the temptation to further interfere in the property market.

The old first time buyer's grant was simply added to the price of new houses. It was nothing more than a subsidy to builders.

Similarly, mortgage interest relief simply pushes up the price of housing by increasing the amount people can afford to pay on housing. There is also something profoundly unfair about creating a situation whereby people that will never be in a position to qualify for a mortgage are forced to subsidise those that can through their taxes. Why should home ownership be subsidised by taxpayers?

If the Government really wants to increase housing supply (and they should), then they should reduce their own cut. Reduce VAT and planning contributions on new houses; treat residential investments the same as commercial investments by allowing for 100% deductibility of interest payments and LPT; impose a site valuation tax to discourage hoarding.

Sarenco said:

I really hope the Government resists the temptation to further interfere in the property market.

The old first time buyer's grant was simply added to the price of new houses. It was nothing more than a subsidy to builders.

Similarly, mortgage interest relief simply pushes up the price of housing by increasing the amount people can afford to pay on housing. There is also something profoundly unfair about creating a situation whereby people that will never be in a position to qualify for a mortgage are forced to subsidise those that can through their taxes. Why should home ownership be subsidised by taxpayers?

If the Government really wants to increase housing supply (and they should), then they should reduce their own cut. Reduce VAT and planning contributions on new houses; treat residential investments the same as commercial investments by allowing for 100% deductibility of interest payments and LPT; impose a site valuation tax to discourage hoarding.

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Home ownership should be incentivised for the same reason private pension schemes are incentivised by taxpayers. People should be encouraged to follow their own self interest into self sufficiency and a position where they are less likely to require state support.

I confused as to how you can argue that it's unfair on worse-off taxpayers to allow mortgage interest relief of PPRs but then argue for 100% deductibility of interest payments for residential investment properties and LPT?
What if mortgage interest relief on PPRs is changed to a tax deductible credit so no actual monies are going 'out' but less is coming in?

All your suggestions about increasing housing supply are good, but I don't see how allowing for 100% deductibility of interest payments and LPT in any way helps housing supply.

Hi Odyssey

Here's the way I see it:

All developed economies encourage their citizens to provide for their old age by deferring taxes on retirement savings. However, housing is just one of many expenses in retirement. There is nothing special about housing in this regard - it's just another line item.

Ultimately, it really doesn't matter if you rent your house from a landlord or rent the money to purchase that house from a bank. A landlord takes out a mortgage (or expends his own capital) so his tenant doesn't have to. The prerogative from a policy perspective is simply to ensure that we have adequate housing.

I think we can can all agree that there is a problem with the supply of appropriate housing in Ireland. Who owns those houses is very much of secondary importance.

If the tax treatment of investing in residential property is disadvantaged as compared to investing in commercial property then, all things being equal, capital will logically be allocated to commercial property in preference to residential housing. I would suggest that we are already starting to see the impact of our current tax policy in this regard when you examine current planning applications.

I would emphasise that I am not advocating giving tax incentives to builders or landlords - I am simply advocating that the provision of rental accommodation should be taxed like any other business. I believe that, in conjunction with other measures, should encourage the level of capital investment in residential housing that we so obviously need.

moneybox said:

They could bring back the first time buyer's grant, it gave a much needed boost to young first time home buyers in the past. Many of us oldies remember buying the furniture and doing the painting and decorating etc with the proceeds. Shame really when they did away with it. It was money spend in the local economy and I feel it also acted as a sort of incentive for young people to purchase or built their own home in those days.

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This would be very unwise.

The FTB grant added to demand, increasing the spending power of buyers. As a result, house prices rise.

Much of the grant ends up in the sellers pocket.

More supply is the answer, not to fuel demand.

moneybox said:

They could bring back the first time buyer's grant, it gave a much needed boost to young first time home buyers in the past. Many of us oldies remember buying the furniture and doing the painting and decorating etc with the proceeds. Shame really when they did away with it. It was money spend in the local economy and I feel it also acted as a sort of incentive for young people to purchase or built their own home in those days.

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This grant was an illusion and only increased the cost of houses as people bid more because their budget was higher with it.

odyssey06 said:

I think we need to increase the supply of houses, but also somehow bias the sales towards PPRs rather than investors.

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I agree on the supply of houses, but you also need investors for people who want to rent.

odyssey06 said:

but then argue for 100% deductibility of interest payments for residential investment properties and LPT?

All your suggestions about increasing housing supply are good, but I don't see how allowing for 100% deductibility of interest payments and LPT in any way helps housing supply.

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It's very simple, the reason there are so few investors willing to buy is because of the interest reduction to 75% and the myrid of other costs associated with being a landlord. This is actually causing people to try and get out of the business as it makes no sense in many cases when you add up the figures.

If there is a way of helping first time buyers without the money going to the previous owner or the builders in the form of higher sales prices I'm all for it.

In my experience all I've ever seen is that government interference can be a very dangerious thing. The first time buyers grant. The Bacon implementation (quickly refersed) the treatment of landlords totally different to other businessess, the stamp duty interferences, the costs of building being far too high due to all sorts of taxes etc.

Bronte said:

It's very simple, the reason there are so few investors willing to buy is because of the interest reduction to 75% and the myrid of other costs associated with being a landlord. This is actually causing people to try and get out of the business as it makes no sense in many cases when you add up the figures.

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We don't need investors willing to buy... there is already sufficient demand in the residential sector in terms of people who want to buy their own homes. If anything, we need less demand. Incentives for landlords would only make sense in a situation where there was a shortage of rental properties specifically. We are currently in a situation where there is a shortage of properties full stop and we have landlords and PPRs chasing the same small set of properties.

The management of demand for commercial versus residential investment should be controlled through planning laws not tax benefits.

Reduce the development levies so that the price of building new houses comes under the threshold of what can be afforded under the new central bank regulations, that will give the sector all the demand it needs and will help to increase supply.

I think investors are willing to sell, not buy. Rents are shockingly high again. Both investors and owners are needed, but there is no property in Dublin (this mainly being a Dublin thing)

Brendan Burgess said:

I wonder will the government do something to help first time buyers?

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The best thing the Govt can do in the Budget for housing is nothing. Leave well alone, stay away.
And Noonan can stop mouthing off about the CB rules needing review...9 months after they came in!!!

What the Govt can do outside of the budget is to look at supply...stop the hoarding of landbanks, look at the tax element contained within the cost of building a new house, look at regulations such as those in Dublin whereby each Apt must have a car parking space and must have windows that are East/South facing

Sensible thing is effect whatever it takes to reduce price and in larger cities increase supply.

3 bedroom home in Dublin =k 300
3 bedroom home in letterkenny = k100.

Do not tell me there is a k200 land price difference.

So Mr Dub has monthly of 1800 over 20 years.
So Mr Donegal has 600 over 20 years.
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Mr Dub has to payxtra 1200 by 12 mths = 14400 per year!
Mr Dub before tax therefore circa e 20,000 per annum!
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That 20,000 has to be factored in on competitiveness etc.

There are things that can be done indirectly, a reduction in DIRT for example will help people saving for deposits (although impact would be limited due to low int rates). likewise a VAT revision may held drive down the cost of building and changes to CAT may make it easier for people to transfer houses to children without a major tax impact (driving down demand). All of these are small tweaks however.

Actually enforcing building standards might help as well, anyone looking to buy a property built in the last 15 years is likely to be nervous after the numerous issues with apartment blocks and Alan Kellys comment's at the weekend. That is going to funnel people away from certain types of properties and drive up demand for the more mature property.

Delboy said:

What the Govt can do outside of the budget is to look at supply...stop the hoarding of landbanks, look at the tax element contained within the cost of building a new house, look at regulations such as those in Dublin whereby each Apt must have a car parking space and must have windows that are East/South facing

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+1

Gerry Canning said:

3 bedroom home in Dublin =k 300
3 bedroom home in letterkenny = k100.
Do not tell me there is a k200 land price difference.

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Sounds like normal and healthy market forces at work. The Dublin property allows access to better-paid jobs, more services and entertainment, better public transport etc. For example, if living in Dublin allows one to earn 15k more, avoid the expense of owning a car, and enjoy better job security (because of a broader pool of potential employers), then the economic argument is over before you even get into lifestyle preferences or environmental benefits.

Gerry Canning said:

Do not tell me there is a k200 land price difference.

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The difference isn't just in the land value, but also the cost of building. Higher costs for labour, materials, transportation, and services in cities.
Builders also incur the extra cost of "tidyness" when building right up to the edges of a property, with no room for materials or machinery to sprawl.

odyssey06 said:

Home ownership should be incentivised for the same reason private pension schemes are incentivised by taxpayers. People should be encouraged to follow their own self interest into self sufficiency and a position where they are less likely to require state support.

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I don't see why property is inherently superior to any other asset class for providing self-sufficiency into old age. Yes we will probably want to consume some residential property for some portion of our old age, but wouldn't that sort of reasoning also lead us to invest in golf courses, utility companies, and healthcare providers?

Protocol said:

This would be very unwise.
The FTB grant added to demand, increasing the spending power of buyers. As a result, house prices rise.

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This is the bottom line for me. We are addicts. As a nation, we have a long-standing and irrational exuberance for property ownership (with apologies to Greenspan). Enabling this addiction can only worsen the problem.

Larger, higher-rise apartments, with longer leases, and robust legal protections for landlords and tenants would make long-term renting more viable and desirable to middle class families, and could make our property situation a lot more economically and environmentally stable and sustainable.

trasneoir said:

I don't see why property is inherently superior to any other asset class for providing self-sufficiency into old age. Yes we will probably want to consume some residential property for some portion of our old age, but wouldn't that sort of reasoning also lead us to invest in golf courses, utility companies, and healthcare providers?

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Golf Courses are not a human right.
Utility companies, well the government includes a household package and the ESB is semi-state?
Healthcare providers, what is the HSE if not a healthcare provider? What about medical insurance community rating?
Given the scale of utility and healthcare providers the level of investment possible by the vast majority of citizens could never approach self sufficiency in it. With housing they can.

As for consuming some residential property for some portion of our old age - where are you planning on living? A yacht? A tent in the phoenix park?

Property is inherently superior because if you have it, you are self-sufficient in it. If it wasn't so essential why would we have social housing and rent supplement?

I'm quite convinced that a policy which encourages home ownership will ultimately lead to less outlay for retirees by the state. Nothing anyone has said thus far in this thread has contradicted this.